The Student’s Debt to Society (2018)

To the American Students,
I write this letter because I am afraid that my conscience will never rest otherwise. What will we say to future generations, when they ask us what we did to stop the madness of these times? Please read on if you still believe that we can save Humanity. I have no agenda, other than a personal wish to leave the better world than the one we have inherited. If these ideas resonate with you, please share them with the people you trust. Student power!

I: The American Nightmare

Each spring, millions of students walk across graduation stages into an uncertain future. Each day brings a new disturbing episode of the American Nightmare, hosted by Donald Trump. Is any of this real? Nobody knows what will happen next! Tune in to to find out if capitalism has self-destructed yet, or if everyone is still pretending everything is fine. RIP Harambe. And what’s going on with the weather, anyway? Are we even going to make it to next season?
We all know how bad things really are. This show sucks. Trump’s apocalyptic face is on every channel and all over the internet- the 1% have hired him to distract and entertain us so that nobody tries to stop them from destroying the future. Audiences are torn; some are still doing the mental gymnastics to defend Trump, some are still surprised each time he tells a bigger lie, but most have simply stopped paying attention, because the struggle to survive in America keeps getting harder regardless.
Maybe we don’t all agree on which problem is the most important, or where all the problems came from, but nobody can deny it- America is a nation divided against itself, and unless our society can evolve, it will destroy itself, and possibly the world. We are on a dangerous path away from reality, towards an existential crisis of civilization which is unprecedented since the fall of the Roman Empire.
We’ve spent our lives in school, waiting for our turn to take on adult roles in society. What have we been studying for? What is all of our time worth, if we let horrible people like Donald Trump and the people he represents decide the future for us?
We have mouthed the pledge of allegiance, regurgitated textbooks, and sat in classrooms watching time pass us by. We have learned, studied, stressed, and dreamed, but the world outside keeps getting scarier.
We’ve watched adults in positions of power make decisions for us, which threaten our dreams for the future. Our representatives in Washington D.C. and the capitalists on Wall Street have made profitable careers lying to the people, while the greatest problems in our society are obscured, ignored and left for the future. As we are becoming adults, the illusion of order and security is dissolving, and older generations are putting the responsibility back on us to save the world from their bad decisions.
At the same time, we’re told that students are “too young” to understand the world, so we should accept the society that has been imposed on us, no matter how broken it is. If we want to change the world and solve its problems, we are told to be patient, moderate, and work within the system, because that’s just how it is! Play by the rules, wait a bit longer, and maybe someday things will be better… let anyone who thinks we have time to wait, please kindly stand out of the way.
In this chaotic moment, American students have the power to break the fourth wall and take control of our society. Students are always silenced by the ruling class, but if we grab the mic and speak truth to power for all the world to hear, we can disrupt regularly-scheduled 24/7 programming and start to write the script for next season. We can lead the world into a future which exists, because we can make better decisions than previous generations did.

We have to create a situation which blocks out the distractions, and forces our society to confront the real problems on Earth, and start thinking of solutions.
What the 1% fear most is when the people get together and organize their collective power, that’s why they spend so much money trying convince us that we have no power. Mario Savio, a student activist from the Berkeley Free Speech movement once wrote that “students are permitted to talk all they want so long as their speech has no consequences.”
If we want to have a voice in our society, we must say what is forbidden, ask questions which cannot be asked, and take actions which have real consequences. If older generations are incapable of fixing the problems they’ve created, we will have to prevent them from making decisions for us, and start deciding for ourselves how we want society to be run.
On December 2nd, 1964, Savio spoke about the purpose of civil disobedience at a massive on-campus protest in opposition to the actions of the administration of UC Berkeley, which was attempting to ban student political speech:
“There’s a time when the operation of the machine becomes so odious, makes you so sick at heart that you can’t take part! You can’t even passively take part! And you’ve got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus — and you’ve got to make it stop! And you’ve got to indicate to the people who run it, to the people who own it — that unless you’re free the machine will be prevented from working at all!”
Change never comes without radical demands and an effective strategy to make those demands impossible to ignore. Our greatest power is not in the voting booth. It’s not our diplomas and degrees. It’s not marching with signs, or breaking windows, or shitposting memes till 3 AM. In America, dollars speak louder than words, especially to the likes of Trump and Education Secretary Betsy DeVos. In Martin Luther King Jr.’s final speech on April 3rd, 1968, one day before his assassination, he advised striking sanitation workers in Memphis, Tennessee: “Always anchor our external direct action with the power of economic withdrawal.”
The greatest economic leverage that we have is our student debt. If we organize a national student debt boycott, students have enough leverage to stop the machine, and seize the attention of the media. When our actions and demonstrations directly threaten the endless greed and profit of the ruling class, our demands for a better future cannot be ignored or silenced. Don’t ask for permission- Steal your education!

II: Betsy’s Bluff

Although our debt is a burden, it could also be used as leverage against Wall Street and Washington; to quote oil capitalist J. Paul Getty, “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” The government institutions and private banks that lend to students knowingly take on risks in loaning us so much money, and the burden is ultimately on them to collect from us. If we simply cannot repay them, or if we refuse, there is only so much they can do to us.
For a student loan boycott to be effective, large numbers of students would have to willingly default on their loans. In order to default, you must fail to make a payment on your loans for at least 90 days. At that point, your credit score may be reduced, and your loans may be sold to a collection agency. Your wages can be garnished directly off your paychecks, and you can be sued. The consequences of default are serious for individuals, but if we coordinate collective defaults, the power and leverage to be gained would outweigh any long-term consequences.

Say you’re in a class, and your teacher has assigned the final test, worth 50% of your overall grade. The night before, you still haven’t studied. Based on previous tests, you know if you don’t study, you will fail. If you don’t pass this class, there is no way you’ll graduate, and your friends will move on without you. It’s a beautiful evening and the last thing you want to do is stay in, but the reward is not worth the risk, so the rational choice is to study.
What if your teacher was Betsy DeVos? The first part of the test is 666 multiple choice questions, but none of the answers are correct. The second part is an essay prompt: How can we convince you to sacrifice the rest of your dreams? The third is a 20 year contract with Mrs. DeVos and Principal Trump written in blood, demanding that you give up your time and money at regular intervals, under pain of legal threats, impoverishment, and humiliation. Don’t read the fine print and sign your name on the dotted line.
At recess, all the students meet up behind the playground. There is unanimous agreement that Betsy’s test is unfair and there is no way to pass it. The test is a poorly-disguised scam to commodify our natural right to education and we have been set up to fail. “We’ve had enough of Betsy- she’s not even a real teacher! Why not turn the situation around on her?” Everyone in the class agrees that they will all hand in blank tests, and they convince the rest of the school to walk out in solidarity. She can’t fail the whole class, and Trump can’t send everyone to detention. Suddenly, the odds that the test will be invalidated makes the short-term risks of failing worthwhile, and the rational choice is to call Betsy’s bluff, and create a situation which goes past the point of no return.

As of 2018, 44 million Americans owe $1.5 trillion in student loan debt, but if we use the leverage we have, that debt will be forgiven long before we ever pay it off. Higher education was once affordable in America- previous generations paid small amounts in tuition to well-funded public universities, and the cost of living relative to inflation was lower. Recently, the costs of college have risen dramatically, but public funding for education has been cut, especially in the years since the Great Recession. We simply don’t have the income to afford our educations.
Lenders to students are well aware that our ability to pay off these loans is suspect at best. The loans are made primarily because it is profitable to do so, not because they care about our futures. What other reason is there to charge compound interest on loans to children? Rather than invest in our future success, our country has invested in our indebtedness. The high interest rates make it profitable to lend to students, even if over the long term a large proportion of borrowers never pay back their loans. As long as we don’t default on our loans in the short term, our debt is their asset.
Although student loans have given more students access to higher education, we should not be loaned money that we can’t pay back. If students loans were not so readily available, and two thirds of American students couldn’t afford to go to college, perhaps our government would finally be forced to prioritize funding public higher education for all Americans, like so many countries do today.
In the student movements of the 1960’s, there was concern that universities were being operated as businesses, in which students were simply products to be manufactured and sold to the government or industry. Today, students have become consumers, and the college degree itself is a product which we must purchase in order to pursue a better career. The value of education cannot be understated, but two thirds of college students now graduate with debt every year- our degrees cost so much, but what are they really worth?
It is generally held to be true that as a matter of morality, one must pay one’s debts. What if we are simply unable to do so? If we cannot pay back the principal of our loans, are we to blame for accepting financial obligations we cannot uphold, or are the lenders to blame for taking unwise risks in lending to students that they know have no money to pay them back?

III: Gambling on the Future

It is not enough for Wall Street to simply profit from our indebtedness, they also have the audacity to gamble with our debts. Debt collectors and student loan capitalists, some under contract with the Department of Education, commodify our debt and trade it in speculative financial markets.
For example, the Navient corporation buys student debt, and issues Student Loan Asset-Backed Securities (SLABS), which are then underwritten by Wall Street financial firms (such as JP Morgan or Goldman Sachs) who sell the securities to investors. SLAB Investors expect these assets to keep paying out at regular intervals, for as long is it takes us repay our loans. Navient services the debt of more than 12 million borrowers- if they’re harassing you to pay your loans back, your debt could very well be bundled into one of their assets.
How can debt be an asset? Individually, our debts could not be considered an asset- even though we are obligated to pay a certain amount, there is no guarantee that we will pay it. However, SLABS are pools of up to hundreds of thousands of student loan debts, and the likelihood that the entire pool will default is much lower than the likelihood of individual defaults. Even if we will mathematically never be able to pay down the principal of our loans in the long term, the investors will profit as long as most of us keep making regular payments on the interest. Student loan capitalists make the most profit from those who are unable to pay back the principal of their loans, but have enough income to avoid default.
Three main credit rating agencies (Fitch, Moody’s and Standard & Poor’s) are paid by financial institutions to assess the risks and potential rewards of assets and securities. As long as default rates are relatively low within the pools of the each security, the agencies will rate the SLABS as investment-grade, and those same financial institutions paying them will continue to make a profit from our suffering. However, if student default rates increase, SLABS will be as worthless on paper as they are in reality.
As of 2018, the federal student loan default rate was 11.5%, but this number obscures the truth. During the Obama administration, income-based repayment plans became prevalent, and now a majority of public student borrowers are in these programs. These income-based/Pay As You Earn programs help make payments more affordable, but they also stretch out the length of loans, and prevent borrowers from defaulting. The consequence of this is that the 11.5% default rate is not an accurate measurement of whether or not students are actually repaying the principal of their loans.
Regardless of whether or not Students choose to boycott their debts, the student loan capitalists like Navient are banking on delusions. The Brookings Institution projected in 2018 that up to 40% of Students may default by 2023, long before most of Navient’s current SLABS mature and pay-out to investors. If default rates today reflected the actual ability of students to fully repay their loans in the future, the assets that Navient and other student loan capitalists trade would lose their value overnight. The credit-rating agencies would downgrade the securities, and with SLABS losing value in the market, investors would sell them to prevent the loss of their initial investments.

This is exactly what happened during the financial crisis of 2007, when the same Wall Street banks, credit rating agencies and government regulators allowed massive betting against the housing market bubble in the early 2000’s. Goldman Sachs and JP Morgan, among many others, were selling Mortgage-Backed Securities (MBS) to investors, while also taking out insurance policies against default on the same securities. If the assets failed, insurance companies such as AIG would be required to pay back the banks for their losses, but investors who bought the MBS lost their investment. As the bubble collapsed and housing prices started to fall, this is exactly what happened.
Any lending institution is required to maintain a certain ratio between the amount of money they actually have on hand and the amount they are lending out, which is known as leverage. Say a hypothetical bank has $1000 in liquid assets (cash), and they are allowed to lend out $500, half of their total assets. Even if their debtors default and fail to repay them, the bank is still in good shape because they are underleveraged, and have plenty of liquid capital on hand to meet their financial obligations.
What if the same bank has $1000 in cash, but $9,000 worth of asset-backed securities? Under the same regulations, they are allowed to lend out $5,000, and still maintain their leverage ratios. On paper, everything is fine, but if the assets underlying the securities fail, the bank has lent out $4,000 that it does not have. Nonetheless, owning these risky assets allows banks to loan out more money at interest and make more profit. This vicious cycle of greed is exactly why so many banks failed during the financial crisis.
Wall Street knew that the assets they were selling were backed only by debt obligations, and that they were massively overleveraged. If you take out an insurance policy on your house, and then burn the house down to try to collect on your policy, you are committing fraud, but none of these banks were prosecuted to the extent that they should have been. Instead, when many banks were in danger of failing because their bets had gone horribly wrong, our elected representatives in both parties voted to bail them out with trillions of taxpayer dollars, while millions of middle and lower class Americans lost their homes.
In the years since, none of the executives of these banks have been prosecuted for their crimes, and the banks continue to make record profits. Some of the executives now have cabinet positions in the Trump administration, like Treasury Secretary Steve Mnuchin, who was once head of the Mortgage Securities department at Goldman Sachs. Our government is full of ex-Wall Street investment bankers and lobbyists. These banks have since become massively overleveraged again, and continued to make risky investments and loans.

In the hypothetical scenario that student borrowers did organize a collective loan default movement, the financial institutions and investors who participate in the SLABS market would face a major dilemma. They too have financial obligations, which they might be unable to meet if their SLABS were suddenly worthless. Their debts would go unpaid, and their creditors would similarly be compromised, so on and so on. There is a potential that the whole SLAB market could fail, as declining demand for some of the assets could drag down the value of the rest, just like the MBS market during the 2007 financial crisis.
A liquidity crisis in the SLAB market could contaminate other markets and threaten the financial stability of Wall Street. The banks who underwrite these SLABS, the investors holding the assets, and anyone they may have borrowed money from are suddenly in trouble. After all, one must pay one’s debts! As Navient acknowledges in the “Risk factors” section of their Form K-10, filed with the Securities and Exchange Commision, “if the prepayment rate is especially slow… the trust’s bonds may not be repaid by their legal final maturity date(s), which could result in an event of default under the underlying securitization agreements.” These banks which have profited from our debt would be faced with the same conditions that they have subjected us to, and unless the government bails them out again, they will fail.
A successful student debt boycott would necessarily threaten or trigger a financial crisis on Wall Street, creating a situation in which Washington is forced to act, either to save the students or save the banks. When the banks are unable to pay their debts, our government rescues them with public funds, but when students are unable to pay their debts, our right to an education is commodified, sold and gambled with for profit.

Students will never get bailed out, until the system of legal corruption that protects the power of the 1% is dismantled, and a new system is put in place which protects the people. Politicians who can be bought and sold will never represent us; as long as one dollar equals one vote, campaign contributions are free speech, and corporations are legally considered people, politicians from both major parties will make whatever policies corporate lobbyists ask for.
We will not be able to vote for an end to corruption. No matter what rhetoric is used by campaigning politicians, any attempts to actually end corruption from within the system will be prevented from succeeding or co-opted by the Republicans or Democrats for their benefit.
If we want our debts to be cancelled, and a more sane way to fund education to be established, we need to take matters into our own hands. It seems impossible, but if we use the leverage we have effectively, our debts will be forgiven long before most of us would ever be able to pay them off.

IV: Risks

Anyone who chooses to not repay their loans is taking a risk, but the consequences of allowing our government to remain in the hands of such heartless and wicked people as Trump are much greater. The media will waste no time in criticizing a student loan boycott as childish and irresponsible, while they devote all of their resources to total coverage of Trump’s every tantrum and outburst. At first they will ignore us, but eventually the consequences of our actions will unavoidable.
If a larger proportion of graduates decide to stop paying their loans, each month the student debt capitalists would be losing money. After 90 days the first wave of boycotters would become delinquent, and our credit scores would be downgraded. This might leave us unable to someday buy homes and cars, but the joke’s on the capitalists, we already can’t afford those things! All those unsold cars sitting in lots and empty homes will grow in number, and they will be no richer. Surely, the capitalists need us much more than we need them, because sooner or later someone has to buy their products, or their power evaporates.
After 270 days, the first wave of boycotters will officially be in default. If the SLABS market hasn’t already crashed, this is the point of no return. Navient’s stock price will surely be underwater, and the damage done to the student loan capitalists will be irreversible. Betsy DeVos could be forced to cancel contracts that the Department of Education has with Navient, and the ability of debt collectors to pursue students would be severely harmed.
It will be said that there is no way we will get everyone on board with a debt boycott, but it actually wouldn’t take a majority of students for the boycott to be effective. So many of us are already not paying our loans back, or paying small amounts of to fend off the collectors. Of particular interest is the fact that a large portion of the SLABS being sold by Navient are made up of loans from New York and California, and boycotts in the SUNY or UC system alone could potentially ruin Navient’s assets. The profit margins that this industry relies upon are so narrow that any harm to their earnings potential would be devastating.
All we have to do is make it a meme: Don’t pay your student loans. That’s it. Write it in the bathroom stalls of the internet, for everyone to see. Graffiti it onto the walls of reality. If kids eating tide pods can take the attention of social media, why can’t a student debt boycott? Make it go viral at your school. Be that guy in the background. Do it for the lols. Even if the boycott itself is unsuccessful, we must make it a question on everyone’s minds, so that nobody can open their monthly bills without considering the wild idea that if we just don’t pay them back, they just can’t get us all.
So what if our credit scores are bad? Equifax, one of the three main consumer credit reporting agencies was hacked and the sensitive information of over 140 million people was exposed. These are people we are supposed to trust? They only provide the illusion of security, but the reality is that these institutions are failing, and will be viewed as grossly primitive and foolish in the future. Their threats will mean nothing if through our actions, we can transform our society.

V: Rewards

We have greater obligations than our debts to the corrupt American government and the corporations which own it. The student’s debt to society is to use the power we have to start a revolution, so that maybe society can evolve and humanity can survive. Unless we stop the American Nightmare, there is no future. If we don’t act now, who will?
Trump will destroy America, not make it great, and in a fit of childish rage bring down the world with him. He and his administration of billionaires and lobbyists have taken control of our government, which is supposed to represent all of us, and are using its powers to protect their privileges and sacrifice our future. Climate change is not a hoax, and nuclear weapons don’t make us safe. The War on Terror hasn’t made us free, the War on Drugs hasn’t made us safe. We cannot, and should not suffer the evil of this government any longer.
Revolution is rejected by liberals and conservatives alike as being a fantasy, childish, or absurd, but the Declaration of Independence leaves no questions about our responsibilities to the future as Americans: “Whenever any form of government becomes destructive to [the people’s rights to life, liberty and the pursuit of happiness], it is the right of the people to alter or to abolish it, and to institute new government… it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.”
Throughout history, students have often been the leaders of popular movements which bring about a re-ordering of society. There is something about education that lends itself to revolution; we have the knowledge to imagine an alternative vision for society, the resources to organize and advocate for our vision, and the audacity to challenge the authority of the ruling class.
50 years ago this May, French university students brought their government to its knees. Protests that began at one university in April, 1968 grew into a general strike of 10 million French students and workers by the end of March, after years of silent inaction. The demands and goals of the movement were not universally agreed-upon or well defined, much like the Occupy movement of 2011. One of the most famous slogans of May ‘68 epitomizes the movement: “Be realistic- demand the impossible!”
The debt boycott is a strategy that directly relates to the condition of our oppression, but we must refuse to repay our debts not just for ourselves, but in solidarity with all of the teachers in multiple states who have gone on strike recently. We must refuse to pay our debts for all of the students of color who have been murdered by police officers who were never held accountable. We must refuse to pay our debts for all of the students who have been killed in schools by their classmates wielding legal weapons of war. We must refuse to pay our debts for the Syrian children whose educations have been interrupted by ongoing civil war and conflict, perpetuated by the actions of our government. We must refuse to pay our debts for the untold billions who will suffer from the effects of man-made climate in the next century.
Even though we will never all agree on which problem is the most important, our problems are rooted in the same corruption, and perhaps we can agree on a strategy which forces society to confront these root causes. The media does so much to polarize and divide us, but when the people are united in a common cause, there is nothing we cannot accomplish. Just as the French students did in 1968, we must lead, and call on our neighbors and families to support us.
If a student debt boycott is successful, and the government is forced to consider bailing out the banks, that is the moment to organize for a new system- not limited by what we think is possible, but what the people actually deserve, and more. We should demand more than just the cancellation of debts. In The Art of the Deal, Donald Trump wrote: “My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after”.
With our leverage, let us demand not that Trump be impeached, but that he resign outright. Demand that the rights of Americans be protected, and any officer of the law who infringes those rights will be held accountable. Ultimately, demand a blank slate- a new government, a new system of laws, taxation, representation. A puppet president, a bought congress and a system of old, unaccountable judges and courts all must go. The problems in our society will never be addressed until we design and enact a new government which is designed to prevent corruption and the abuses of power by wealthy individuals. If we can imagine it, we can make it real.
All over the world, people are unhappy with their governments. As the world has increasingly become connected, the ruling class has realized that their control over us is weakening, and it is our moment to speak out against them. Is there any country whose corruption is not related to our own? If Americans students rise up, the students of the world may follow. When Trump was elected, protesters marched all over the planet. What makes us so different from students in China, or in Russia, and what makes their leaders different from ours? We all share the same Earth, the same dreams for the future. If we can find solidarity with them, what do we have to fear? If students lead, the world will follow. We are the future.